With rising interest rates in the U.S., now may be an opportune time for investors to consider diversifying into global bonds, the Bank of New York Mellon says.
However, a new BNY Mellon survey of financial advisors and retail investors finds that while a majority (56%) of financial advisors recommend holding at least some global fixed income securities in an investment portfolio, only 30% of retail investors reported having any.
The survey included 201 financial advisors and 356 retail investors (defined as active in their own investment decisions and having $100,000 or more in investable assets).
The survey finds that financial advisors are much more likely than retail investors to prioritize global fixed-income securities.
According to the survey, 38% of retail investors surveyed – compared with 63% of financial advisors – believe it's important that their portfolio includes global fixed income securities.
Global fixed income has its benefits right now, as Raman Srivastava, co-portfolio manager for the Dreyfus/Standish Global Fixed Income Fund, points out.
"The global bond market is at an inflection point – we believe the disconnect in global monetary policy has created an opportunity to generate positive fixed-income returns outside the U.S.," Srivastava said in a statement. "The survey results highlight this may be an optimal time for investors to consider global fixed income securities as a core holding within their investment portfolio. Financial advisors can close this gap by educating investors on the impact of interest rate hikes on U.S. bond prices, as well as the potential benefits of diversifying their fixed income portfolios across global markets."
Because of the divergence in global interest rates, that means potentially better opportunities abroad than in the U.S. Global fixed income also has the potential to minimize risk. Investors can de-risk their core fixed income allocation through global diversification, according to BNY Mellon.
For retail investors, some of their hesitation to hold global fixed income may be due to several misperceptions.
